John Lee’s 2023 policy address shows Hong Kong is waking up to new realities

While acknowledging the city’s vulnerability to larger economic and geopolitical forces, the chief executive delivered a blueprint that draws on new thinking to try to rebalance Hong Kong’s economy away from its traditional reliance on tourism and finance

Regina Ip

Published: 5:30am, 29 Oct 2023

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On October 25, Chief Executive John Lee Ka-chiu delivered his second policy address with continuing emphasis on the economy and a wide gamut of measures to improve livelihood, from land and housing to support for women, the elderly and ethnic minority groups.

Before the announcement, the markets had expected reductions in stamp duties on stock and property transactions. The measures that were unveiled – reducing the stock transaction stamp duty to 0.1 per cent, shortening the applicable period of the special stamp duty to two years, halving the new residential stamp duty and buyer’s stamp duty and suspending stamp duty for new arrivals – failed to give the markets an immediate boost.

But the longer-term impact on business sentiment should not be underestimated. The evaporation of wealth stemming from the downturn of the stock and property markets has dampened consumption. For a city with a narrow economic structure and is heavily reliant on consumption, the diminution of wealth across the board spells trouble for this engine of growth.

Lee faces strong geopolitical headwinds. There appears to be a campaign in foreign media to talk down China and Hong Kong’s prospects while playing up corporate departures and an imagined collapse. After seismic changes in our lifestyle and business patterns after the Covid-19 pandemic, some reshuffling of the deck is inevitable.

Tales of retreats need to be balanced against positive news. Prestigious international schools report that more students from Asian countries are enrolling, and there is no shortage of students from Hong Kong’s traditional partners.

The policy address shows welcome signs of waking up to new realities and discarding old ways of thinking.

With an estimated 200,000 Hongkongers having left the city to go overseas and ongoing tensions between China and the United States, it is only right that the government should open the doors of our universities to admit more non-local students, provide more scholarships for students from countries that are part of the Belt and Road Initiative and ease visa restrictions for talented workers from Vietnam, Laos and Nepal.

The policy address devoted much space to reporting the progress made in enhancing Hong Kong’s position as a global or regional centre in eight areas, as laid down in the 14th five-year plan. A pleasant surprise was the measures to develop Hong Kong as a health and medical innovation hub. Step one is the establishment of a drug approval authority based on a “primary evaluation” approach.

Hong Kong may need 10 years to create drug regulation scheme with global status

Hong Kong’s drug approval process is notoriously long because the city has no local drug approval system. In accordance with its small-government approach, Hong Kong has adopted a “secondary evaluation” system and gives approval for new drugs based on the evaluations made by regulatory authorities on the mainland and in more than 30 other countries.

By switching to a “primary evaluation” system for the registration of drugs and medical equipment based on clinical data, Hong Kong would be able to give approval faster and attract more pharmaceutical and medical device enterprises to the city.

With Hong Kong’s established foundations in medical science, it is well-placed to set up its own drug regulatory authority and work with other cities in the Greater Bay Area to set up large-scale clinical trials for drugs and data banks, subject to suitable protection of personal data privacy.

Chief Executive John Lee Ka-chiu attends a question and answer session following his 2023 policy address at the Legco Chamber in Admiralty on October 26. Lee’s second policy address laid out a wide array of measures intended to revitalise Hong Kong’s economy and the spirit of its people. Photo: Sam Tsang

While Lee painted a bright future for Hong Kong based on his blueprint, he also acknowledged that Hong Kong cannot succeed under “one country, two systems” solely by leveraging support from the mainland and Hong Kong’s own unique strengths and characteristics.

In a question and answer session with lawmakers the day after the policy address, he made clear that Hong Kong must also pay attention to the big picture and the complex geopolitical environment around the city. Hong Kong is on the cusp of change, and the world is marked by regional conflicts and intense international competition.

Lee’s words were prescient. Only a day after the chief executive’s second policy address delivered some good news to the stock and property markets, the Hang Seng Index fell below 17,000, but the weakness was unrelated to what was said – or not said – in Lee’s policy address. The downturn was triggered by a broad sell-off of US stocks following disappointing earnings results from Google’s parent Alphabet, as well as an uptick in US Treasury yields.

The World Trade Organization has lowered its estimates for growth in global trade next year because of an economic slowdown in major countries and the prospect of continued high interest rates and tight money supply. There is not much Hong Kong can do to change this.

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Hong Kong halves buyer’s stamp duty for non-residents as part of measures to boost economy

However, there is much it can and should do to speed up restructuring, spice up the city’s appeal to international tourists and investors and broaden its talent and labour pool, including adopting more innovative measures to boost fertility rates and hence its population base. The government should make full use of the available resources, especially the many talented people in business, academia and civil and political society.

Hong Kong’s future will be bright if its people believe in their ability to turn the city around and showcase to the world that Hong Kong remains a brave, vibrant, diverse and inclusive society.

Regina Ip Lau Suk-yee is convenor of the Executive Council, a lawmaker and chairwoman of the New People’s Party